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This chapter will review the e-banking system in Malaysia and review the relevant literature on consumer perception towards e-banking. In addition, this literature review also considers the discussion of customer satisfaction and loyalty towards internet banking.
2.1 Benefits and Dis-advantages of Internet Banking
2.1.1 Benefits of Internet Banking
Bu using internet, clients can access to their accounts doing transaction or access to other services with cost reduction and more convenience because online bank are operation 24hours per day, 7days per week.
Furthermore, banks able to expand their market penetration internationally and offer personalized online services like clients able to check their account balances and monthly statement by login to the secure website of the bank, make payments, and transfer funds to other accounts. The speed of online banking transaction is generally faster than ATM processing speeds.
Internet banking also provides advantages likes flexibility, individually and mobility which is a brand new distribution channel for clients to make on-line transaction. The improvement of internet protection through security technologies such as automatic log-off, firewalls, encryption, monitoring tools and authentication to ensure clients trust on internet banking (Banking Info, 2007).
Table 1 are the benefits arise are summarized by Thulani et al.(2009) in their research paper on various study of internet banking.
Bradley and Stewart (2003), Rotchanakitumnuai and Speece (2003), Jayawadhera and Foley (2000), Nath et al 2001, Al-Sukkar and Hasan (2005) and Singh (2004), Corrocher (2002),Chang (2003), Sullivan and Wang (2005).
Increased customer base
Bradley and Stewart (2003), Jayawadhera and Foley (2000), Jen-Her Wu et al 2006 and Singh (2004), Corrocher (2002).
Enable innovation and development of non-core business services
Jayawadhera and Foley (2000), Nath et al. (2001), Karem (2003), Corrocher (2002), Chang (2003).
Marketing and communication
Jayawadhera and Foley (2000), Karem (2003), Corrocher (2002).
Increased consumer loyalty and satisfaction
Jen-Her Wu et al 2006 and AL-Sukkar and Hasan (2005), Nath et al. (2001).
High profit consumers
Jen-Her Wu et al 2006 and AL-Sukkar and Hasan (2005), Nath et al. (2001).
Ability to attract new consumers
AL-Sukkar and Hasan (2005).
Table 1: Benefits of Internet Banking
Source: Thulani et al. (2009)
2.1.2 Dis-advantage of Internet Banking
AL-Sukkar and Hasan (2005) and Singh (2004) had identify the disadvantages of develop internet banking. They stated clients have to pay indirect cost as some of the internet banking systems charge money on browsing connectivity on personal computer. Moreover, cash are not available through internet. Customers are unable to withdraw cash or deposit cash by using internet banking. They also emphasize on security concerns, the issue of security concerns may delay the clients’ adoption of internet banking.
Before using internet banking, applicant required to go through some procedure in one of the bank branch, especially the clients want to open a joint account. Some of the clients not familiar to internet browsing, they have to go through tutorials to familiarize with the navigation tools. Unfortunately, clients require re-familiarizing the navigation tools to access their account once banks update and upgrade their online system.
Last but not least, trustworthiness is the most difficult yet most important issue face by clients. They always wonder whether the transaction or payments have been proceeding to another account accurately.
2.2 Aspect that Influence Consumer Perception towards Internet Banking
Three of the most important characteristics of financial services to extend e-banking are: High availability, Scalability, and Security. (Antovski and LJ, 2001). According to them, high availability also can define in reliability, availability and serviceability. The e-banking are design for easy and continuous service to customers.
Yibin and MU (2003) also stated the three improvements of the system infrastructure which are to build-up the reporting services for online transaction, improve the e-payment system, and improve the telecommunications infrastructure and other forms of electronic transaction. Factors such as the speed of transactions or the cost of using the Internet have little impact on an individual’s final decision. After setting up better system infrastructure through Web, the new delivery channel can highly recommended to clients by giving guarantee on security, privacy and trust of Web system to minimize barrier.
The following research provided the analysis on different aspect that will effect customer perception towards internet banking.
2.2.1 Electronic Security (E-Security)
Electronic security is a tool or process designed to restrict entry or prevent unauthorized access to a system’s information assets or is a risk-management (Thomas et al., 2002). Mueller (2001) stated that e-security prevents the hacker and others from accessing customer’s information, security pin number or credit card number. Thomas et al. (2002) highlighted e-security adds value to a naked network.
Thomas et al. (2002) stated that although technology offer a new distribution channel for financial institution but it creates opportunities for crimes to be committed very quickly. A criminal can use the tools available on the Web to hack database on internet and steal personal hidden identities in seconds. This is why e-security must be taken very seriously. However, Raigaga (2000) stated that some banker has delay the online banking service due to the security concern.
Consumer perceptions of security are measure through the operations and processes of encryption, protection, verification and authentication. The mechanisms of encryption, digital authentication, firewalls, protection, filtering routers, and personal identification numbers influence the internet customers’ perception towards security and might increase the confidence and trust of consumer.
E-security is one of the important factors to be stressed. Most of the customers refuse to use internet banking as the alternative way to carry on transaction and payment because they afraid of losing their private information and data on hacker.
“Trust is considered as a strategic variable in current marketing” (Selnes, 1998). Meanwhile, the development of internet banking brings new challenges, this lead to an increase of motivation in bank to provide a better service. Bank image will might slightly improve if clients’ able to enjoy better service. Bank image and consumer trust are significant influence the individual behavior (Ratnasingham, 1998).
Bank image and customer trust are significantly affect individual behavior and their level of perception (Ratnasingham, 1998; Rexha et al., 2003; Lehu, 2001; Ba, 2001). Since the online banking give a higher level of risk to the clients, so Gefen et al. (2003) stated that trust is an important aspect to take note when doing internet transaction because it determines the nature of businesses. The issue of trust arises when risk is involved.
Trust is the main factor being concern because bank and clients are physically separated from each other and there is a large number of suspicious about the e-security over the Internet. Generally, customers distrust and worries about the reliability of internet banking even the e-security system is good. Furthermore, clients’ lack of confidence and trust on the e-security is the main obstacle prevent e-banking is being developed further. As William Pitt, the eighteenth century British statesman once said, “confidence is a plant of slow growth”.
2.3 Customer Satisfaction and Loyalty towards Internet Banking.
For offline environments, quality of services is a key determinant of customer satisfaction and customer loyalty (Caruana, 2002; Cronin and Taylor, 1992; Kelley and Davis, 1994; Parasuraman et al., 1988). The quality of services delivered through internet has develop wisely and significant success since the services accepted by clients.
Moreover, Fassnacht and Kose (2007) found that electronic service quality had an important role in building customer trust. Customer is important in providing the level of satisfaction over electronic service quality. Their past experience is one of the factors that influence their rating and satisfaction on electronic service quality.
“Understanding customer’ requirements and meeting their demands and expectations is becoming a challenge” (Shailey et al., 2003). But some users feel that internet is not useful even though its ease of use eventually lose interest in using Internet banking.
Nexhmi et al. (2003) stated that clients’ satisfaction will have a role in development but a more important element is to maintain close bank-customer relationship. Overall customer satisfaction with the bank will be directly related to the level of trust within the relationship.
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